The financial firms customers admire most

August 16, 2021 12:00 AM

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Why do consumers choose to bank with one institution over another?

That’s the question American Banker set out to answer when it teamed with the creative experience agency Monigle to survey consumers about what drives customer satisfaction and advocacy in banking.

Leveraging Monigle’s proprietary social sciences model and framework on Humanizing the Customer Experience, we found that even as demand for digital financial services intensifies, the human touch still matters in banking. We found that while traditional banks still own large market shares, they face increasing competition from credit unions and challenger banks, particularly when it comes to developing personal connections with customers.

We also learned a lot about why some financial firms fail to forge strong bonds with their customers. Indeed, among the key takeaways from this inaugural report is that banks, credit unions and challenger banks alike all have room for improvement.

Monigle examined four key dimensions of the customer experience to determine how financial institutions can boost overall satisfaction and convert customers into brand advocates.

Behavioral: The physical and digital interactions people have with financial institutions.
Intellectual: What people think about when they go through their decision-making checklists.
Emotional: The implicit motivators that define what people feel about their banks or credit unions.
Sensorial: The visual, auditory and olfactory senses people connect with the environments created by financial institutions.

The full research report and additional details on the methodology can be found here. What follows below are some of the key findings.

The pacesetters

American Banker and Monigle collaborated to survey more than 5,000 U.S. consumers, who evaluated financial institutions on factors thought to drive customer satisfaction — and even advocacy. Based on the survey, Monigle ranked the institutions based on their customers’ perceptions of superb service and abilities to form durable relationships with their clients.

The $57.5 billion-asset New York Community Bank Bancorp topped the list. The company, based in Westbury, New York, was joined in the top 10 of the rankings by three other traditional banks, four credit unions and a pair of challenger banks.

Customer feedback was favorable for those institutions that offer both first-rate digital banking services and strong conventional in-person service options, said Brian Elkins, senior director of strategy at Monigle.

So what separates the top 10 from bottom 10? The banks and credit unions at the top of the rankings have struck the right balance between digital and in-person interactions. They win high marks for making customers feel a sense of belonging and are seen as being active in their communities and demonstrating a commitment to ethical business practices.

The challenger banks, meanwhile, not only have top-notch digital offerings, they are viewed as being exceptionally caring about their customers' financial health. Many challenger banks, for example, don't charge overdraft fees or will offer customers' early access to their wages — practices that even mainstream banks are now starting to adopt.

The laggards, on the other hand, fail to engage with customers on multiple levels. Some are seen as being too slow to respond to customers' concerns or complaints or not understanding of customers' needs. Others are not visible in their communities or their digital tools don't measure up to those of competitors. In short, they don't make customers feel excited about their brands or make them feel particularly confident about their financial health.

The complete rankings

The Monigle study looked at four types of institutions — retail banks, credit unions, challenger banks and online-only banks — and it’s clear from the results that credit unions have developed strong bonds with their customers. Though only five credit unions were included in the rankings, four of them wound up in the top 10.

Credit unions scored particularly well on the emotional motivators relative to other financial Institutions. Credit unions, the survey found, often score high for making customers feel like they’re a part of something larger — a community with shared interests and goals.

The $148 billion-asset Navy Federal Credit Union in Vienna, Virginia, for example, serves members of the U.S. armed forces and specializes in delivering financial services to those in the military as they join, train, travel and transition through the ranks. Like other highly rated credit unions, Naval Federal is seen as a positive force, active in the communities it serves and committed to ethical business practices, the environment and customers.

The $17.5 billion-asset Golden 1 Credit Union, in particular, has forged a strong emotional connection with its customers, the majority of whom are in California. The feedback from customers is that the credit union makes them feel as if they are part of something bigger. Navy Federal, Golden 1 and the $15.9 billion-asset America First Credit Union are also seen as providing above-average service, both in-person and via digital channels.

Overall, the average customer experience score was 40.42, according to the American Banker/Monigle study. Twenty-six institutions — including industry giants JPMorgan Chase, Wells Fargo and Bank of America — came in with scores at or above average, while 24 had below-average scores.

Brand advocates

It's no accident that New York Community Bank landed at the top of the rankings.

The bank, which primarily operates in New York and New Jersey but also has more than 60 branches in Florida, Ohio and Arizona, ranked No. 1 in all four drivers: behavioral, intellectual, emotional and sensorial. It's seen as delivering a well-rounded experience on behavioral and emotional elements and excelling at meeting its customers' emotional needs.

Union Bank, the U.S. subsidiary of Japanese banking giant Mitsubishi UFJ Financial Group, rated high with customers not just for its sophisticated product offerings but also for its ethical business practices and being a positive force in the communities it serves.

Five of the 10 — two banks, two credit unions and the challenger bank Chime — had top-10 scores in all four drivers and all ranked in the top 10 in the behavioral and emotional elements.

As the attached chart shows, the top financial providers have learned to deliver on the whole experience — not just certain individual pieces — so that the bank-to-customer relationship becomes more engaging and meaningful. Put another way, they have humanized the customer experience in a way that has created a legion of satisfied customers and brand advocates.

Banks that lead in “humanizing the customer experience” are able to deliver what consumers want and need across all four areas of the human experience, Monigle noted. Top-ranked institutions make people feel safe and create a sense of belonging, and their digital and physical presences appeal to these senses.

A challenge from challenger banks

Challenger banks, collectively, also performed well on the emotional dimension, coming in second place, representing a potential threat to traditional retail banks. Challenger banks often offer low-cost or no-fee accounts, early access to paychecks, and credit-building tools that report rent payments and other alternative information to credit bureaus.

Some also offer automated savings and access to investment tools. Several of these companies distinguish themselves by catering to niche audiences. No. 10-ranked MoneyLion in Sandy, Utah, for example, offers mobile banking, investing and loans but also has begun developing a marketplace that will invite partners and competitors to offer products alongside its own.

These products will be offered in a way similar to how Costco offers its store-brand products next to rival name brands. Customers applaud MoneyLion for innovation aimed at helping them find the best products and financial services in a convenient, one-stop fashion.

The bottom line: Despite their size and deeper pockets, traditional banks can expect challenger banks to keep siphoning off their customers.

Matter of trust

Overall, strengths of high-ranked institutions included safety, security and trust, as well as breadth of product offerings. Additionally, rewards and loyalty remain paramount to the customer experience, the survey found, regardless of the type of financial institution or product.

Still, when it comes to trustworthiness and the breadth of product offerings — key elements in the intellectual driver — retail banks with less than $200 billion of assets ranked highest with customers, followed closely by retail banks with more than $200 billion of assets and credit unions. For all their digital savvy, online and challenger banks have struggled to meet all of consumers' banking needs.

The survey shows that investment in rewards is often a key differentiator. Rewards incent customers to use services and “foster emotional connections” with their bank or credit union, “deepening ties and loyalty,” said Monigle’s Elkins.

Tech effect

For all the need to focus on humanizing the customer experience, digital banking is increasingly important. From Generation Z (61%) to Baby Boomers (50%), at least half of every generation would always use or prefer to use online and mobile channels over in-person banking, the survey found. Almost one quarter (23% for Gen Z) and (24% for Boomers) would be equally comfortable using both.

The social distancing imposed by the pandemic is widely believed to have accelerated this secular trend. This makes it paramount for all financial institutions to invest in technology as customer preferences evolve and demand for digital financial services further intensifies.

Digital “is always evolving,” said Tammy Gellegos, chief strategy officer at America First Credit Union in Riverdale, Utah. She said the $15.9 billion-asset organization, which was No. 2 in the rankings, holds technology “in a continuous focus to ensure the easiest experience for our members. It should be as simple as possible,” and the latest technology is vital to delivering on that.